I don’t think we’re going to get any policy shocks from the ECB today. Mr Draghi is likely to point to the upbeat numbers recently while warning that any recovery is in it’s infancy and subject to headwinds. What will be interesting to see is how he crosses the subject of inflation which showed signs of falling further from the ECB target of “at or close to 2%”. The September flash estimate fell from 1.1% to 1.0%, in the EU harmonised inflation count, while the headline number fell to 1.1% from 1.3%. He’s likely to point to the falls coming from lower oil and food prices and will probably not show any concern. Certainly I think it has started to become a concern behind the scenes.
There’s still some ebb and flow in inflation when it came off the crisis peak of over 4% to nearly -1% in mid 2009. It topped out at 3% late in 2011 and has been falling since. He may gloss over it today, but if the revised number confirms the fall, and we get another fall for October then that might start to put some pressure on the ECB to act to get it under control. While there is little movement available to them on interest rates it shouldn’t be ruled out.
No doubt the LTRO will be asked about and how the US shutdown will affect Europe. Italian politics will come up obviously.
It’s not often we get a run of ECB meetings where there’s not much wrong to focus on and Draghi will be more than happy with that.
As usual we’ll have it covered blow by blow and the press conference from Paris can be viewed live here.
